As the digital age unfolds, powerful technologies and ubiquitous data offer new strategic choices for products, services and business models. At the same time, these technologies also present new operational choices for designing, coordinating and managing people, and examining existing processes and workflows.
Conversations about “digital transformation” often focus on technology investments, talent and changing business processes. Relatively less attention falls on the organization that must fulfill the chosen digital strategies. Research suggests that optimal transformation also involves reshaping the enterprise itself into a “digital organization.”
So, what is a “digital organization?”
Digital organizations demonstrate an elevated organizational capability to use their tools and data to dynamically deploy and reconfigure both human and capital resources at the speed of rapidly changing technology and market conditions. We call this digital dexterity.
These organizations don’t just adopt digital innovations, but also:
- Use digital data more intensively to make decisions, guide action, and learn for the future.
- Collaborate more extensively to bring diverse expertise to bear quickly on novel situations.
- Establish partnerships, identify talent, and find experts more readily than those that have not adapted their organizations to take full advantage of digital connectivity.
- Self-organize at different scales to act fast under a variety of conditions.
Digital dexterity is evident in their ability to adapt quickly to narrow windows of digitally driven customer-facing opportunity, or respond rapidly to customers’ individual needs and preferences, while balancing evolving localized and company-wide standards.
Transitioning from the Industrial Age to the Digital Age
Building this kind of capability involves change on three fronts:
1. Mindsets: At the heart of the transition from “industrial organization” to “digital organization” are new attitudes, beliefs, and values towards digital tools, information, organization, management, workers and the work itself. These organizations often consider their “workforces” broadly, engaging not just employees but also partners, customers, and contingent workers as resources to achieve their enterprise goals.
A positive and proactive attitude toward digital possibilities is particularly important. In digital organizations, an instinctive “digital-first” mindset is evident in how people throughout the firm tend to explore digital solutions before manual ones, use digital tools to seek out expertise, seek opportunities to use technology for advantage, and approach data systematically. They understand the opportunities and risks of engaging with these solutions, and so proceed confidently.
2. Practices: It is not enough to just ‘talk the (digital) talk’ – organizations must also ‘walk the (digital) walk.’ As enterprises digitize their operations, new behavioral norms and routines need to become widespread and consistent.
- First, organizations should use their digitized operations data to practice data-driven decision-making. To get the most out of digitization, organizations must use their accumulating data in systematic analyses to make important strategic decisions, as well as to monitor and refine internal processes.
- Second, organizations should practice collaborative learning — sharing information readily across locations, disciplines and status boundaries to solve problems – to make effective decisions in domains where data is still lacking.
Together, these complementary practices support rapid but effective decision-making and responsive action in different domains.
3. Resources: Organizational capability also depends on structural and concrete elements such as digital and physical tools, skills, formal structures and infrastructures. The following resources are especially useful for making the transition to a digital organization:
- A digital-ready workforce of engaged and self-directed workers who can take on the challenges that automation cannot (yet) address.
- Broad-based access to digital communication and coordination tools to enable collaborative learning and exchange across internal and external boundaries.
- Integrated operations data to enable employees to actively monitor, measure, and improve operations.
- Real-time customer data to help workers customize services while also supporting them in sensing subtle but important external shifts.
Collectively, these digital resources support intense information processing and broad social connections, a combination that enables timely sensing and powerful responses involving both humans and machines.
A Journey to Digital Alignment
It can be helpful to think of this transformation effort as a journey, during which traditional mindsets, practices and resources give way to digital mindsets, practices and resources. These changes often unfold at different speeds, and might occur incrementally or in bursts of effort. But they are interdependent and iterative, so changes in one domain become the impetus for further change elsewhere.
This journey can be uncomfortable at times. However, as organizations reach a threshold of digital dexterity, where they are positioned to rapidly respond to emerging digital opportunities – they can begin to do this over and over.